FTX Direct Clearing Plan Was ‘Not Even Close’ to Decision, CFTC Chief Says

The U.S. Commodity Futures Trading Commission (CFTC) was nowhere near making a decision on controversial FTX plans to streamline financial market structure rules, which were proposed before the crypto exchange went bust, agency head Rostin Behnam said at an event Monday.

In March, FTX’s US arm proposed to merge traditionally separate roles of trading and clearing in directly settling certain crypto derivatives contracts – but the empire of chief executive Sam Bankman-Fried now lies in tatters, after CoinDesk revealed a blurring of lines with its trading arm Alameda Research.

“There are elements of the application that I think have merit, but ultimately, we didn't come up with a decision,” CFTC Chair Behnam told an event hosted by the Financial Times. “We were actually not even close, because there were more questions and answers,” he added, citing issues of law, policy and risk.

FTX said it wanted to allow customers to assess and respond to derivatives risks in real time, but withdrew its plans on the same day it filed for bankruptcy, Nov. 11. In October Behnam had called the idea “unique” and potentially another phase in financial market innovation, in the face of pushback from the traditional financial sector.

Behnam defended the close contacts between FTX staff and his own officials as they discussed the ideas.

“FTX and its management team came in quite frequently,” Behnam said. “As the chairman of the agency, I wanted to be squarely involved to make sure that I was seeing what was happening in terms of the process,” with all parties able to participate, he said.

“We at the CFTC had a legal responsibility to respond to the application,” he said. “We can't just rubber stamp yes or no, we have to have a legal basis, it has to be anchored in the law.”